-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Olebt7h6pFgoMkajHuySOomJyNy98S9JwHV77IVgcnaZBqyZcxT2OWPFhOKp67Ro Zig7exL0E+VHY3xlx5eC5w== 0001193125-04-091798.txt : 20040520 0001193125-04-091798.hdr.sgml : 20040520 20040519183814 ACCESSION NUMBER: 0001193125-04-091798 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040520 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERTAN INC CENTRAL INDEX KEY: 0000803227 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RADIO TV & CONSUMER ELECTRONICS STORES [5731] IRS NUMBER: 752130875 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10062 FILM NUMBER: 04819761 BUSINESS ADDRESS: STREET 1: 279 BAYVIEW DRIVE CITY: BARRIE ONTARIO STATE: A6 ZIP: L4M 4W5 BUSINESS PHONE: 7057286242 MAIL ADDRESS: STREET 1: 279 BAYVIEW DRIVE STREET 2: - CITY: BARRIE ONTARIO STATE: A6 ZIP: L4M 4W5 10-Q/A 1 d10qa.htm FOR THE QUARTER ENDED DECEMBER 31,2003 FOR THE QUARTER ENDED DECEMBER 31,2003
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q/A

Amendment No. 1

 


 

(Mark One)

 

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended December 31, 2003

 

or

 

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from              to             

 

Commission file number 1-10062

 


 

InterTAN, Inc.

(Exact name of registrant as specified in its charter)

 


 

Delaware   75-2130875

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

279 Bayview Drive

Barrie, Ontario Canada

  L4M 4W5
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (705) 728-6242

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  x    No  ¨

 

At January 31, 2004, 20,211,214 shares of the registrant’s common stock, par value $1.00 per share, were outstanding.

 



Table of Contents
     Page

PART I     

Introductory note regarding forward-looking information

   3

ITEM 1 - Financial Statements and Supplementary Data

    

Consolidated Statements of Operations

   5

Consolidated Balance Sheets

   6

Consolidated Statements of Cash Flows

   7

Notes to Consolidated Financial Statements

   8

ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

   16

ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk

   25

ITEM 4 – Controls and Procedures

   27
PART II     

ITEM 1 - Legal Proceedings

   27

ITEM 4 - Submission of Matters to a Vote of Security Holders

   27

ITEM 6 - Exhibits and Reports on Form 8-K

   28
OTHER     

Signatures

   31

 

Explanatory Note: InterTAN, Inc. is filing this Amendment No. 1 on Form 10-Q/A to its Form 10-Q for the period ended December 31, 2003 that was originally filed on February 6, 2004 (the “Original 10-Q”) to make certain technical corrections to (i) Part I Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations, (ii) Part I Item 4 Controls and Procedures and (iii) Part II Item 1 Legal Proceedings. For the convenience of the reader, this Amendment No. 1 amends in its entirety the Original 10-Q. This Amendment No. 1 continues to speak as of the date of the Original 10-Q, and we have not updated the disclosure contained herein to reflect any events that occurred at a later date. All information contained in this Amendment No. 1 is subject to updating and supplementing as provided in our periodic reports filed with the SEC subsequent to the date of the filing of the Original 10-Q.

 

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INTRODUCTORY NOTE REGARDING FORWARD-LOOKING INFORMATION

 

Certain statements in this Report on form 10-Q constitute forward-looking statements that involve risks and uncertainties. The forward-looking statements include statements regarding:

 

  The resolution of the Company’s dispute with the purchaser of its former subsidiary in Australia;

 

  The outcome of various Australian, Canadian and United States income tax issues and the timing of the payment of related tax liabilities;

 

  Estimates of future foreign exchange rates;

 

  Management’s estimates of future sales growth and gross margin and selling, general and administrative expense percentages;

 

  Future levels of interest income and expense and income taxes;

 

  The adequacy of the Company’s liquidity and its short-term borrowing requirements;

 

  The adequacy of the indemnity obtained from the purchaser of the Company’s former subsidiary in the United Kingdom;

 

  Possible payments under indemnities provided to the purchaser of InterTAN Australia Ltd.;

 

  Forecasted capital expenditures for the fiscal period ending March 31, 2004;

 

  Estimates of cash required to fund the repurchase of common stock; and

 

  The intended change of the Company’s domicile to Canada and its conversion to an income trust.

 

Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements include, but are not limited to:

 

  The occurrence of certain material events including natural disasters, acts of terrorism, the outbreak of war or other significant national or international events;

 

  Changes in the national or regional economic conditions, including but not limited to, recessionary trends, level of equity markets, consumer credit availability, interest rates, foreign exchange rates, inflation, consumers’ disposable income and spending levels, job security and unemployment, and overall consumer confidence;

 

  Interest and foreign exchange rate fluctuations;

 

  The imposition of new restrictions or regulations regarding the sale of products and/or services we sell or changes in tax rules and regulations applicable to us;

 

  Impact of technological changes on the retail price and profit margins associated with products in our product categories;

 

  The presence or absence of new products in our product categories, particularly digital products, including the level of consumer acceptance of new technology;

 

  The inability to liquidate inventory should excess inventory develop;

 

  The lack of availability or access to sources of inventory;

 

  Dependence on manufacturers’ product development;

 

  The imposition of additional restrictions or regulations regarding the sale of products or services we offer;

 

  The value of the Company’s common stock and the general condition of the stock market;

 

  Changes in the availability of suitable real estate locations for expansion on acceptable terms;

 

  The disruption of international, national or regional transportation systems;

 

3


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  Changes in the amount and degree of promotional intensity exerted by current competitors and potential new competition from both retail stores and alternative methods or channels of distribution, such as e-commerce, telephone shopping services and mail order;

 

  The inability to attract, retain and grow an effective management team in a dynamic environment or changes in the cost or availability of a suitable work force to manage and support our service-driven operation strategies;

 

  The inability to successfully maintain our business arrangements or strategic alliances;

 

  The occurrence of severe weather events or natural disasters, which could destroy outlets or prevent consumers from traveling to our retail locations, especially during the peak winter holiday season;

 

  The inability to react in a timely manner and maintain our critical business processes and information systems capabilities in a disaster recovery situation; and

 

  Other risks indicated in InterTAN’s previously filed periodic reports with the Securities and Exchange Commission, including its Form 10-K for the 2003 fiscal year.

 

These risks and uncertainties are beyond the ability of the Company to control, and in many cases the Company cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements.

 

4


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ITEM 1 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Consolidated Statements of Operations

(U.S. dollars in thousands, except per share amounts)

(Unaudited)

 

     Three months ended
December 31


   

Six months ended

December 31


 
     2003

    2002

    2003

    2002

 

Net sales and operating revenues

   $ 171,284     $ 137,381     $ 277,743     $ 230,284  

Other income (loss)

     5       (19 )     (28 )     (8 )
    


 


 


 


       171,289       137,362       277,715       230,276  

Operating costs and expenses:

                                

Cost of products sold

     98,783       82,379       163,188       138,907  

Selling, general and administrative expenses

     50,330       38,819       86,930       70,035  

Depreciation

     1,991       1,669       3,923       3,310  
    


 


 


 


       151,104       122,867       254,041       212,252  
    


 


 


 


Operating income

     20,185       14,495       23,674       18,024  

Foreign currency transaction gains (losses)

     (183 )     (3 )     (236 )     168  

Interest income

     51       63       100       159  

Interest expense

     (315 )     (384 )     (502 )     (582 )
    


 


 


 


Income before income taxes and cumulative effect of accounting change

     19,738       14,171       23,036       17,769  

Income taxes

     10,847       6,174       12,664       7,837  
    


 


 


 


Income before cumulative effect of accounting change

     8,891       7,997       10,372       9,932  

Cumulative effect of accounting change for vendor allowances, net of income taxes of $388 (Note 2)

     —         —         —         (580 )
    


 


 


 


Net income

   $ 8,891     $ 7,997     $ 10,372     $ 9,352  
    


 


 


 


Basic net income per average common share

                                

Before cumulative effect of accounting change

   $ 0.43     $ 0.38     $ 0.50     $ 0.47  

Cumulative effect of accounting change

     —         —         —         (0.03 )
    


 


 


 


Basic net income per average common share

   $ 0.43     $ 0.38     $ 0.50     $ 0.44  
    


 


 


 


Diluted net income per average common share

                                

Before cumulative effect of accounting change

   $ 0.43     $ 0.37     $ 0.50     $ 0.47  

Cumulative effect of accounting change

     —         —         —         (0.03 )
    


 


 


 


Diluted net income per average common share

   $ 0.43     $ 0.37     $ 0.50     $ 0.44  
    


 


 


 


Average common shares outstanding

     20,469       21,192       20,546       21,275  

Average common shares outstanding assuming dilution

     20,819       21,361       20,871       21,487  
    


 


 


 


 

The accompanying notes are an integral part of these consolidated financial statements.

 

5


Table of Contents

Consolidated Balance Sheets

(U.S. dollars in thousands, except share amounts)

(Unaudited)

 

     December 31
2003


    June 30
2003


    December 31
2002


 

Assets

                        

Current Assets

                        

Cash and short-term investments

   $ 38,528     $ 10,322     $ 15,277  

Accounts receivable, less allowance for doubtful accounts

     36,047       16,275       25,523  

Inventories

     94,068       92,433       87,574  

Deferred service contract costs - current portion (Note 10)

     1,551       1,368       1,177  

Prepaids, deposits and other current assets

     1,785       5,301       1,385  

Deferred income taxes

     1,358       1,306       1,325  
    


 


 


Total current assets

     173,337       127,005       132,261  

Property and equipment, less accumulated depreciation

     35,697       33,537       28,637  

Deferred service contract costs - non-current portion (Note 10)

     1,351       1,071       913  

Other assets

     655       761       681  

Deferred income taxes

     4,110       3,955       3,461  
    


 


 


Total Assets

   $ 215,150     $ 166,329     $ 165,953  
    


 


 


Liabilities and Stockholders’ Equity

                        

Current Liabilities

                        

Short-term bank borrowings (Note 5)

   $ 4,677     $ —       $ —    

Accounts payable

     31,665       22,633       26,894  

Accrued expenses

     30,130       15,290       24,763  

Income taxes payable (Note 9)

     10,387       1,867       2,203  

Long-term bank indebtedness - current portion (Note 5)

     1,543       1,484       1,272  

Obligation under capital leases - current portion

     275       216       168  

Deferred service contract revenue - current portion (Note 10)

     9,867       8,809       7,599  

Deferred income taxes

     286       400       —    
    


 


 


Total current liabilities

     88,830       50,699       62,899  

Long-term bank indebtedness - non-current portion (Note 5)

     4,628       5,937       5,088  

Obligation under capital leases - non-current portion

     550       432       340  

Deferred service contract revenue - non current portion (Note 10)

     8,311       6,917       6,305  

Other liabilities

     5,110       4,847       4,340  
    


 


 


Total liabilities

     107,429       68,832       78,972  
    


 


 


Stockholders’ Equity

                        

Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding

     —         —         —    

Common stock, $1 par value, 40,000,000 shares authorized, 32,625,174, 32,453,259 and 32,255,307, respectively, issued

     32,625       32,453       32,255  

Additional paid-in capital

     160,997       159,776       158,799  

Common stock in treasury, at cost, 12,443,493, 11,857,093 and 11,386,093 shares, respectively

     (129,476 )     (123,760 )     (120,655 )

Retained earnings

     45,403       35,031       36,672  

Accumulated other comprehensive loss

     (1,828 )     (6,003 )     (20,090 )
    


 


 


Total stockholders’ equity

     107,721       97,497       86,981  
    


 


 


Commitments and contingencies (See Notes 9 and 11)

                        

Total Liabilities and Stockholders’ Equity

   $ 215,150     $ 166,329     $ 165,953  
    


 


 


 

The accompanying notes are an integral part of these consolidated financial statements.

 

6


Table of Contents

Consolidated Statements of Cash Flows

(U.S. dollars in thousands)

(Unaudited)

 

     Six months ended
December 31


 
     2003

    2002

 

Cash flows from operating activities:

                

Net income

   $ 10,372     $ 9,352  

Adjustments to reconcile net income to cash provided by operating activities:

                

Depreciation

     3,923       3,310  

Deferred income taxes

     (113 )     —    

Stock-based compensation

     561       594  

Other

     65       34  

Cash provided by (used in) assets and liabilities:

                

Accounts receivable

     (18,630 )     (13,052 )

Inventories

     1,999       (8,880 )

Other current assets

     3,558       (156 )

Accounts payable

     7,879       14,614  

Accrued expenses

     13,739       5,647  

Income taxes payable

     8,297       (5,907 )

Deferred service contract revenue

     1,772       1,042  

Deferred service contract costs

     (451 )     (29 )
    


 


Net cash provided by operating activities

     32,971       6,569  
    


 


Cash flows from investing activities:

                

Additions to property and equipment

     (4,341 )     (3,123 )

Proceeds from sales of property and equipment

     11       57  

Other investing activities

     286       (293 )
    


 


Net cash used in investing activities

     (4,044 )     (3,359 )
    


 


Cash flows from financing activities:

                

Short-term bank borrowings

     17,322       35,167  

Repayments of short-term bank borrowings

     (12,803 )     (35,425 )

Long-term bank indebtedness

     —         6,382  

Repayments of long-term bank indebtedness

     (1,502 )     —    

Proceeds from issuance of common stock to employee plans

     650       642  

Proceeds from exercise of stock options

     182       43  

Repayment of obligation under capital leases

     (119 )     (21 )

Purchase of treasury stock

     (5,715 )     (9,128 )
    


 


Net cash used in financing activities

     (1,985 )     (2,340 )
    


 


Effect of exchange rate changes on cash

     1,264       (292 )
    


 


Net increase in cash and short-term investments

     28,206       578  

Cash and short-term investments, beginning of period

     10,322       14,699  
    


 


Cash and short-term investments, end of period

   $ 38,528     $ 15,277  
    


 


 

The accompanying notes are an integral part of these consolidated financial statements.

 

7


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Notes to Consolidated Financial Statements

 

Note 1 Basis of Financial Statements

 

The fiscal year end of the Company has been June 30. On December 5, 2003, the Board of Directors approved a change in fiscal year end from June 30 to March 31 to better reflect the Company’s operational business cycle. Accordingly, the current fiscal period of the Company will only include nine months and will end March 31, 2004. Hereinafter the nine-month period ending March 31, 2004 will be referred to as “the 2004 fiscal period”.

 

The accompanying consolidated unaudited financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X, “Interim Financial Statements”, and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. The consolidated financial statements have been prepared in conformity with accounting principles and practices (including consolidation practices) as reflected in InterTAN, Inc.’s (“InterTAN” or the “Company”) Annual Report on Form 10-K for the fiscal year ended June 30, 2003, and, in the opinion of the Company, include all adjustments necessary for a fair presentation of the Company’s financial position as of December 31, 2003 and 2002 and the results of its operations for the three and six months ended December 31, 2003 and 2002 and its cash flows for the six months ended December 31, 2003 and 2002. Such adjustments are of a normal and recurring nature. Operating results for the three and six months ended December 31, 2003 are not necessarily indicative of the results that can be expected for the fiscal period ending March 31, 2004. These are interim financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2003.

 

Certain previous year amounts have been reclassified to conform to the current-year presentation. This included reclassifying the current and non-current balances of deferred service contract costs, which had previously been netted against deferred service contract revenue, to assets. This reclassification has no impact on the consolidated statements of operations, stockholders’ equity and cash flows.

 

Note 2 New Accounting Standards

 

During fiscal year 2003, the Company changed its method of accounting for vendor allowances in accordance with Emerging Issues Task Force Consensus No. 02-16 (“EITF 02-16”). The new standard requires that these allowances and certain other amounts received by resellers from vendors be treated as a reduction of the cost of inventory acquired from the vendor and recorded as a component of the cost of products sold when the related product or service is sold, unless the amount represents a reimbursement of a specific, identifiable and incremental cost incurred to sell the vendor’s products or services. Previously, and in accordance with generally accepted accounting principles, the Company had recognized and recorded vendor allowances as a reduction of advertising expense included in selling, general and administrative expenses. The cumulative effect of the change in the method of accounting for vendor allowances resulted in an after-tax, non-cash charge to net income of $580,000.

 

In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in an entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period ending after December 15, 2003. The adoption of FIN 46 did not have a material impact on the Company’s consolidated financial statements as it does not currently have any

 

8


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interests in any variable interest entities. FIN 46 was amended in December 2003 (“FIN46R”). The provisions of FIN46R must be applied for the first interim or annual period ending after March 15, 2004. Management does not anticipate that the adoption of FIN46R will have a material impact on the Company’s consolidated financial statements.

 

In April 2003, the FASB issued Financial Accounting Standards No. 149 (“FAS 149”) – “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”. This statement amends FAS 133 by requiring that contracts with comparable characteristics be accounted for similarly and clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. FAS 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003 and must be applied prospectively. The adoption of FAS 149 did not have a material impact on the Company’s consolidated financial statements.

 

In May 2003, the FASB issued Financial Accounting Standards No. 150 (“FAS 150”) – “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. This statement established standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. FAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003 and must be applied prospectively by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. The adoption of FAS 150 did not have a material impact on the Company’s consolidated financial statements as it does not currently have any financial instruments with characteristics of both liabilities and equity.

 

Note 3 Stock Based Compensation

 

The Company measures the expense associated with its stock-based compensation using the intrinsic value method. Application of this method generally results in compensation expense equal to the quoted price of the shares granted under the option less the amount, if any, the director or employee is required to pay for the underlying shares.

 

Because the Company uses the intrinsic value method of accounting for compensation expense related to stock options granted to employees and directors and because, with the exception of certain options granted to directors during fiscal year 1999, the exercise price of the stock options granted is equal to the market price of the common stock on the date of the grant, compensation expense has typically not been recognized upon the grant of stock options. Had the Company adopted the fair value method of recognizing stock-based compensation, the estimated fair value of the options granted would have been amortized to compensation expense over the vesting period. Pro forma information is presented below for the three and six months ended December 31, 2003 and 2002 as if the Company had adopted the fair value method.

 

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Three months
ended

December 31


   

Six months

ended

December 31


 

(U.S. dollars, in thousands, except per share amounts)


   2003

    2002

    2003

    2002

 

Net income as reported

   $ 8,891     $ 7,997     $ 10,372     $ 9,352  

Stock-based compensation expense included in reported net income, net of related tax effects

     —         17       —         57  

Total stock-based compensation expense determined under fair value method for all awards, net of related tax effects

     (279 )     (244 )     (446 )     (560 )
    


 


 


 


Pro forma net income

   $ 8,612     $ 7,770     $ 9,926     $ 8,849  
    


 


 


 


Basic net income per common share, as reported

   $ 0.43     $ 0.38     $ 0.50     $ 0.44  

Basic net income per common share, pro forma

   $ 0.42     $ 0.37     $ 0.48     $ 0.42  

Diluted net income per common share, as reported

   $ 0.43     $ 0.37     $ 0.50     $ 0.44  

Diluted net income per common share, pro forma

   $ 0.41     $ 0.36     $ 0.48     $ 0.41  
    


 


 


 


 

Note 4 Earnings per Share

 

Basic earnings per share (“EPS”) is calculated by dividing the net income or loss for a period by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted.

 

Basic and diluted net income per average common share and a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation is set out below:

 

     Three months ended December 31

     2003

   2002

(U.S. dollars in thousands,

except for per share data)


  

Income

(Numerator)


  

Shares

(Denominator)


  

Per Share

Amount


  

Income

(Numerator)


  

Shares

(Denominator)


  

Per Share

Amount


Income before cumulative effect of accounting change

   $ 8,891                $ 7,997            
    

              

           

Basic EPS

                                     

Income available to common stockholders

   $ 8,891    20,469    $ 0.43    $ 7,997    21,192    $ 0.38
                

              

Effect of Dilutive Securities

                                     

Stock options

     —      350             —      169       
    

  
         

  
      

Diluted EPS

                                     

Income available to common stockholders including assumed conversions

   $ 8,891    20,819    $ 0.43    $ 7,997    21,361    $ 0.37
    

  
  

  

  
  

 

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     Six months ended December 31

     2003

   2002

(U.S. dollars in thousands,

except for per share data)


  

Income

(Numerator)


  

Shares

(Denominator)


  

Per Share

Amount


  

Income

(Numerator)


  

Shares

(Denominator)


  

Per Share

Amount


Income before cumulative effect of accounting change

   $ 10,372                $ 9,932            
    

              

           

Basic EPS

                                     

Income available to common stockholders

   $ 10,372    20,546    $ 0.50    $ 9,932    21,275    $ 0.47
                

              

Effect of Dilutive Securities

                                     

Stock options

     —      325             —      212       
    

  
         

  
      

Diluted EPS

                                     

Income available to common stockholders including assumed conversions

   $ 10,372    20,871    $ 0.50    $ 9,932    21,487    $ 0.47
    

  
  

  

  
  

 

At December 31, 2003 and 2002, the Company’s directors and employees held options to purchase 1,127,441 and 980,187 common shares, respectively, at prices ranging from $2.4792 to $11.875. During the three months ended December 31, 2003 and 2002, all but 357,589 and 650,269 of such options were considered in calculating diluted EPS. These options were excluded because the option exercise price was greater than the average market price of the Company’s common stock during such periods. The dilutive effect of these options in future periods will depend on the average price of the Company’s common stock during such periods.

 

Note 5 Bank Debt

 

In December 2002 the Company’s Canadian subsidiary entered into a new credit facility (the “Credit Facility”) in the amount of C$85,000,000 (Approximately $65,569,000 at December 31, 2003 exchange rates) with a major Canadian bank, replacing its existing asset-backed facility which had been in place since December 1997. The Credit Facility consists of two revolving renewable facilities and a five-year non-revolving term facility.

 

The first one-year renewable revolving facility is for C$30,000,000 (approximately $23,142,000 at December 31, 2003 rates of exchange.) This facility is intended for normal working capital requirements and is available throughout the year. The Credit Facility, as amended on September 15, 2003, provides that the amount that can be used for letters of credit is limited to C$5,000,000 during fiscal year 2003 (approximately $3,857,000 at December 31, 2003 rates of exchange), increasing to C$14,000,000 and C$17,000,000 during fiscal years 2004 and 2005, respectively. Further increases of C$2,000,000 each are contemplated for fiscal years 2006 and 2007.

 

The second one-year renewable revolving facility is for C$45,000,000 (approximately $34,713,000 at December 31, 2003 rates of exchange) This facility is for seasonal working capital requirements and is available only during the annual period of September 1 to January 31. This facility cannot be used for letters of credit and must be repaid in full each January 31.

 

Advances under these revolving facilities are limited to a borrowing base calculation tied to the Company’s accounts receivable and inventories. At December 31, 2003, no amounts were outstanding under either facility. The short-term bank borrowings of $4,677,000 at December 31, 2003 represent a book overdraft due to outstanding cheques. At December 31, 2003, C$3,035,000 (approximately $2,341,000 at December 31, 2003 rates of exchange) was committed in support of letters of credit. At December 31, 2003, C$41,965,000 (approximately $32,372,000 at December 31, 2003 rates of exchange) was available for use under these facilities.

 

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The Credit Facility also includes a five-year non-revolving term facility in the amount of C$10,000,000 (approximately $7,714,000 at December 31, 2003 rates of exchange). This facility is intended for capital expenditures or the repurchase of the Company’s common stock. In December 2002, the Company drew down on this facility in full to finance the seventh share repurchase program announced in October 2002. At December 31, 2003 C$8,000,000 (approximately $6,171,000 at December 31, 2003 rates of exchange) was outstanding under this facility. A repayment of C$2,000,000 (approximately $1,543,000 at December 31, 2003 rates of exchange) was made on December 15, 2003. Further repayments of C$2,000,000 are due on December 17, 2004 through December 17, 2007, inclusive.

 

The Credit Facility requires that the Company remain in compliance with certain financial ratios including the current ratio, fixed charge coverage ratio, tangible net worth and total adjusted debt to tangible net worth. The Company was in compliance with all these covenants at December 31, 2003. Borrowing rates under the facility range from Canadian prime plus 0.50% to prime plus 1.5%, based on the Company’s quarterly performance against predetermined fixed charge coverage ratios. Using the same criteria, the Company may borrow at Canadian bankers’ acceptance and LIBOR rates plus from 1.50% to 2.5%. Letters of credit are charged at rates ranging from 1.5% per annum to 2.5% per annum, using the same performance criteria. Using the same fixed charge coverage test, a standby fee of 0.25% to 0.50% is payable on the unused portion of the revolving credit facilities at that time. The weighted average interest rate paid by the Company under its credit facility for the quarter was 7.44%.

 

Security granted by InterTAN Canada Ltd. to secure its obligations under the Credit Facility include a demand debenture with a face value of C$125,000,000 (approximately $96,425,000 at December 31, 2003 rates of exchange), general security agreement, charge/mortgage on real property owned by it and a general assignment of accounts receivable. The obligations of InterTAN Canada Ltd. are further secured by a guarantee issued by InterTAN, Inc. of all future indebtedness, liability and obligations now or in the future owing by it to lenders under the Credit Facility.

 

The cost of establishing the Credit Facility, including professional fees and a loan origination fee were approximately C$1,000,000 (approximately $771,000 at December 31, 2003 rates of exchange). These costs have been allocated between the revolving and non-revolving facilities. Costs aggregating C$290,000 (approximately $224,000 at December 31, 2003 rates of exchange) were allocated to the short-term facilities and the remaining C$710,000 (approximately $548,000 at December 31, 2003 rate of exchange) were allocated to the long-term facility. These costs will be amortized over the terms of the respective facilities.

 

Note 6 Restructuring Charge

 

During fiscal year 2002, the Company recorded restructuring charges aggregating $2,912,000, representing the cost of streamlining the Company’s Corporate Office and integrating it with InterTAN’s operating subsidiary, InterTAN Canada Ltd., and of reorganizing the merchandising and marketing groups.

 

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The following is a summary of activity within the restructuring reserve during the six months ended December 31, 2003:

 

(U.S. dollars in thousands)


   Balance
June 30
2003


   Paid

   Balance
December 31
2003


Retirement, severance and other compensation costs

   $ 1,353    $ 118    $ 1,235
    

  

  

 

The remaining balance will be paid on a monthly basis through December 2011.

 

Note 7 Treasury Stock Repurchase Program

 

By June 30, 2003, the Company had completed seven previously announced share repurchase programs. In total, under all seven plans, 11,736,250 shares had been acquired by June 30, 2003 for total consideration of $122,278,904, or approximately $10.42 per share. On April 22, 2003 the Company announced an eighth stock repurchase program under which management is authorized, subject to regulatory approval and market conditions, to purchase up to 1,025,000 additional shares, approximately 5% of the Company’s common shares then outstanding. Regulatory approval to proceed with this plan was received in July 2003. During the second quarter of fiscal year 2004, 586,400 shares were acquired under the eighth plan at an aggregate cost of $5,715,437, or approximately $9.75 per share.

 

Note 8 Comprehensive Income

 

Comprehensive income is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the Company, comprehensive income includes net income and the net change in foreign currency translation effects. The comprehensive income for the three months ended December 31, 2003 and 2002 was $13,127,000 and $8,697,000, respectively. For the six months ended December 31, 2003 and 2002, comprehensive income was $14,547,000 and $6,384,000, respectively.

 

Note 9 Income Taxes

 

The provision for domestic and foreign income taxes for the three and six months ended December 31, 2003 was $10,847,000 and $12,664,000, respectively, representing Canadian income tax on the profits of the Company’s Canadian subsidiary as well as $2,400,000 in United States taxes, representing management’s estimate of the tax owing as a result of the conclusion of a long outstanding dispute with the Internal Revenue Service. The Company, on the advice of counsel, had believed that the chances of a favorable outcome on this matter were good and accordingly, no loss provision had been previously recorded. In January 2004, the Company was advised that the United States Tax Court had issued a judgment in favor of the Internal Revenue Service. The Company intends to appeal the Tax Court decision. For the three and six months ended December 31, 2002, the provision was $6,174,000 and $7,837,000, respectively.

 

During fiscal years 1999 and 2001, the Company reached agreements with the Canadian tax authorities, settling substantially all of its remaining outstanding Canadian tax issues. In October 2002, a payment of approximately $7,300,000 was made in satisfaction of a significant portion of these issues. Management estimates that its liability with respect to the remaining issues is approximately $2,725,000. Management further believes that it has a provision recorded sufficient to pay the estimated liability resulting from these issues; however, the amount ultimately paid could differ from management’s estimate.

 

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Note 10 Product Warranties

 

Products sold in the Company’s stores typically carry a one-year warranty covered by the product manufacturer. Accordingly, the Company does not provide for the expected warranty costs. The Company also offers extended warranty plans to its customers. These contracts extend the warranty period beyond the original warranty period provided by the manufacturer and provide enhanced benefits. The term of these contracts, including the original warranty period, is typically three years. As the Company is the primary obligor on these contracts, all revenue on the sale of extended warranty plans is deferred and is amortized on a straight-line basis, over the term of the contract. The Company has certain recourse for a portion of the obligation against the manufacturer during the one-year warranty period covered by such manufacturer. The Company pays its sales associates a specific commission on the sale of extended warranty plans. These costs are also deferred and expensed ratably over the term of the contracts. The following is a summary of the activity in the deferred revenue and deferred charge accounts during the three and six months ended December 31, 2003:

 

     Three months ended December 31, 2003

 

(U.S. dollars, in thousands)


   Balance
September 30
2003


    Additions

   

Amortized
to

Income


    Foreign
Currency
Effects


    Balance
December 31
2003


 

Deferred revenue

   $ 16,003     $ 4,290     $ (2,810 )   $ 695     $ 18,178  

Deferred costs

     (2,482 )     (760 )     445       (105 )   $ (2,902 )
    


 


 


 


 


     $ 13,521     $ 3,530     $ (2,365 )   $ 590     $ 15,276  
    


 


 


 


 


     Six months ended December 31, 2003

 

(U.S. dollars, in thousands)


  

Balance

June 30

2003


    Additions

   

Amortized
to

Income


    Foreign
Currency
Effects


    Balance
December 31
2003


 

Deferred revenue

   $ 15,726     $ 7,213     $ (5,439 )   $ 678     $ 18,178  

Deferred costs

     (2,439 )     (1,223 )     862     $ (102 )   $ (2,902 )
    


 


 


 


 


     $ 13,287     $ 5,990     $ (4,577 )   $ 576     $ 15,276  
    


 


 


 


 


 

Note 11 Commitments and Contingencies

 

In connection with the sale of its former United Kingdom subsidiary during fiscal year 1999, the Company remains contingently liable as guarantor of certain leases of InterTAN U.K. Limited. At December 31, 2003 the remaining lease obligation assumed by the purchaser and guaranteed by the Company was approximately $14,000,000 and the average remaining life of such leases was approximately 4 years. If the purchaser were to default on the lease obligations, management believes the Company could reduce the exposure through assignment, subletting and other means. The Company has obtained an indemnity from the purchaser for an amount equal to management’s best estimate of the Company’s potential exposure under these guarantees. At December 31, 2003, the amount of this indemnity was approximately £4,000,000 (approximately $7,144,000 at

 

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December 31, 2003 exchange rates.) The amount of this indemnity declines over time as the Company’s risk diminishes. It was reduced to £3,000,000 (approximately $5,358,000 at December 31, 2003 exchange rates) in January 2004 and will be reduced by a further £1,000,000 each succeeding January, until it is reduced to zero in January 2007.

 

In April 2001, the Company sold its Australian subsidiary. The gain on disposal reported in fiscal year 2001 was based on management’s calculation of certain adjustments to be paid following completion of the sale. The purchaser has advised the Company that it disagrees with management’s calculation of those adjustments and has commenced legal action in support of its claim. Management believes that its calculation of the adjustments is appropriate and that there are strong arguments against the position adopted by the purchaser. The Company is in the process of vigorously defending its position. Should the purchaser prevail in this dispute, the Company would have an additional liability of approximately $3,126,000 at December 31, 2003 rates of exchange.

 

Management believes there are authoritative arguments in support of the position that the gain on the sale of the Australian subsidiary is exempt from Australian capital gains tax by virtue of the tax treaty between the United States and Australia, and, accordingly, no Australian tax was recorded with respect to the sale. However, there can be no assurance that the Australian tax authorities will not challenge this position. If Australian tax were to apply to the gain on sale, the Company would have an additional liability of approximately $10,445,000, at December 31, 2003 rates of exchange, which the Company would vigorously dispute.

 

Apart from these matters and the issues discussed in Note 9, there are no pending proceedings or claims, other than immaterial routine matters incidental to the Company’s business, to which the Company or any of its subsidiaries is a party, or to which any of its property is subject.

 

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Table of Contents

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Results of Operations

 

InterTAN is engaged in the sale of consumer electronics products primarily through company-operated retail stores and dealer outlets in Canada. The Company’s retail operations are conducted through a wholly owned subsidiary, InterTAN Canada Ltd., which operates in Canada under the trade names “RadioShack” and “Battery Plus”. The Company previously also had retail and dealer outlets in Australia. The “RadioShack” trade name is used under license from RadioShack Corporation (“RadioShack U.S.A.”). In addition, the Company has entered into an agreement in Canada with Rogers Wireless Inc. (“Rogers”) to operate wireless telecommunications stores (“Rogers Wireless Stores”). At December 31, 2003, 84 Rogers Wireless stores were in operation. For a discussion of the Company’s agreement with Rogers, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations –Sales Outlets” in InterTAN’s Annual Report on Form 10-K for the fiscal year ended June 30, 2003. The Company also acquired selected assets of Battery Plus, a retailer of batteries and other specialty consumer electronics products in April 2002. At December 31, 2003, 35 Battery Plus stores were in operation.

 

On December 5, 2003, the Board of Directors approved a change in fiscal year end from June 30 to March 31 to better reflect the Company’s operational business cycle. Accordingly, the current fiscal period of the Company for 2004 will only include nine months and will end March 31, 2004. Hereinafter the nine-month period ending March 31, 2004 will be referred to as “the 2004 fiscal period”.

 

Future Capital Structure

 

On November 3, 2003, the Company announced that its Board of Directors had authorized management to prepare for a change of the domicile of the Company from Delaware to Canada. Ultimate implementation of this change will be subject to shareholder approval and the Board’s judgment that such a change is in the best interests of the Company having particular regard to legislative and market conditions at the time. When implemented, this transaction, referred to as an inversion, is expected to provide the Company with several advantages over its current structure. Such advantages include:

 

  The new Canadian corporation would be incorporated where its operations, revenues, business prospects and management are located.

 

  The Board of Directors and management of InterTAN believe a Canadian corporation may be a more attractive investment to a wider range of Canadian investors.

 

  The proposed structure may facilitate the acquisition by the corporation of other businesses in Canada as opportunities arise, and therefore make it easier to achieve growth through acquisitions.

 

  Certain expenses incurred by InterTAN, the deductibility of which is now unavailable to InterTAN because it has no offsetting income for U.S. tax purposes, could be offset by the new Canadian corporation against the revenue stream generated through its operations in Canada resulting in an annual savings of approximately $1,000,000.

 

  The Board of Directors believes a Canadian corporation provides an advantageous platform in connection with any possible transaction in the future wherein the resulting Canadian corporation would be converted into a public investment vehicle known as an income trust, a form of entity with income-yielding securities, if we desire to effect such a conversion. Any such conversion will be subject to market conditions and the determination by the Board that it would be in the best interests of the Company’s shareholders.

 

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It is anticipated that requisite filings with the Securities and Exchange Commission will be made by mid to late February 2004 and that subject to obtaining necessary regulatory and shareholder approvals, the Company could complete the inversion by mid to late May 2004. The costs associated with the transaction are estimated to be approximately $1,500,000, with as much as $880,000 of such amount to be incurred in the final quarter of the 2004 fiscal period.

 

Restructuring Charge

 

During fiscal year 2002, the Company recorded a restructuring charge of $2,912,000, representing the cost of streamlining the Company’s Corporate Office and integrating it with InterTAN’s operating subsidiary, InterTAN Canada Ltd., and the restructuring of its merchandising and marketing groups.

 

The following is a summary of activity within this reserve during the six months ended December 31, 2003:

 

(U.S. dollars in thousands)


   Balance
June 30
2003


   Paid

   Balance
December 31
2003


Retirement, severance and other compensation costs

   $ 1,353    $ 118    $ 1,235
    

  

  

 

The remaining balance will be paid on a monthly basis through December 2011.

 

Foreign Exchange Effects

 

Profit and loss accounts, including sales, are translated from local currency values to U.S. dollars at monthly average exchange rates. During the second quarter of the 2004 fiscal period, the Canadian dollar was 19.1% stronger against the U.S. dollar relative to the comparable value during the second quarter of the prior year. As a result, the same local currency amounts in Canada translated into more U.S. dollars as compared with the prior year. For example, if local currency sales in Canada in the second quarter of the 2004 fiscal period were the same as those in the second quarter of the prior year, the 2004 fiscal period income statement would reflect a 19.1% increase in sales when reported in U.S. dollars. For the six months ended December 31, 2003, the Canadian dollar was 16.9% stronger against the U.S. dollar than during the comparable period last year.

 

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Table of Contents

Sales Outlets

 

The Company’s sales outlets by type and geographic region is summarized in the following table:

 

     June 30
2003


   Opened

   Closed

   Dec. 31
2003


   Dec. 31
2002


Company-operated

   498    15    6    507    489

Rogers Wireless

   79    5    —      84    77

Battery Plus

   38    —      3    35    44

Dealer

   337    10    15    332    358
    
  
  
  
  
     952    30    24    958    968
    
  
  
  
  

 

Net Sales and Operating Revenues

 

Sales for the quarter in U.S. dollars were $171,284,000. In Canadian dollars, this represented a total sales increase of 5% over the prior year. Comparable store sales increased by 2% over the same period last year. This difference is attributable to new stores as, since December 31, 2002 the Company has opened, on a net basis, 18 new company owned RadioShack stores and 7 new Rogers Wireless stores. Sales, measured in U.S. dollars, increased by 25%, reflecting a Canadian dollar that was almost 20% stronger than during the second quarter last year. For the six months ended December 31, 2003, sales in local currency increased by 3% while sales measured in U.S. dollars increased by 21%, reflecting a Canadian dollar that was almost 17% stronger over the same period in the prior year. Comparable store sales for the six months ended December 31, 2003 increased by 1% over the same period last year.

 

All major product category groups performed well over the quarter with the exception of the home and personal entertainment product group. The computer and digital camera group achieved a sales gain of 14%. The Company’s strategy to revitalize the sales of CPU’s, laptops and accessories continues to be successful and digital cameras continue to perform well. The parts, accessories and seasonal product group posted an 11% sales gain, driven by the sales of the many new gadgets and unique product items the Company has introduced into this product line. In addition, toys also performed well, in part as a result of a more attractive assortment and more effective promotion. Batteries continue to produce steady growth in this category. Sales in the telephone, wireless and communication category increased by 8%, primarily as a result of increased wireless revenue, as the Company continues to place emphasis on the sale of more profitable contract phones. The increase in this product group was partially offset by a reduction in revenue from the sale of prepaid airtime, as the Company and its carrier deemphasized prepaid phones and as prepaid airtime became more readily available in other channels. Sales of home and personal entertainment products declined by 9%, largely as a result of the continued malaise in the home satellite market. In addition, sales of video gaming products also declined sharply as the Company minimized its exposure in the video gaming and software business which has shifted a large part of the risk of obsolescence of these products to retailers. After the sale compensation in the form of residuals and sales-based volume rebates increased by 8.2%.

 

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Table of Contents

Gross Profit

 

The gross profit percentage for the quarter was 42.3%, compared with 40% in the second quarter of fiscal year 2003, an increase of 230 basis points. Gross profit dollars, measured in local currency, increased by $17,499,000 for the quarter. For the six months ended December 31, 2003, gross profit dollars increased by $23,178,000. The following analysis summarizes the components of the changes in gross profit dollars for the second quarter of the 2004 fiscal period and for the six months ended December 31, 2003 with the comparable prior year periods:

 

(U.S. dollars in thousands)


   Quarter

   Year to
Date


Increase in sales

   $ 3,043    $ 3,408

Increase in gross margin percentage

     3,927      4,344

Foreign currency effects

     10,529      15,426
    

  

     $ 17,499    $ 23,178
    

  

 

The increase in the gross margin percentage is primarily a result of the successful execution of the Company’s merchandising plan, including the impact of the sales of new gadgets and unique product items added to the product line as discussed above. The new products and other assortment changes helped to improve margins across the board. The increase in after the sale compensation, which has no associated product cost, also added to the margin improvement for the quarter, as did the sales gain in the high-margin parts, accessories and seasonal product group.

 

Selling, General and Administrative Expenses

 

The following table provides a breakdown of selling, general and administrative expense (“SG&A”) by major category:

 

     Three months ended December 31

   Six months ended December 31

     2003

   2002

   2003

   2002

(U.S. dollars in thousands,
except percents)


   Dollars

   % of Sales

   Dollars

   % of Sales

   Dollars

   % of Sales

   Dollars

   % of Sales

Payroll

   $ 21,953    12.8    $ 16,500    12.0    $ 37,426    13.5    $ 29,921    13.0

Advertising

     9,515    5.6      7,025    5.1      14,192    5.1      11,107    4.8

Rent

     6,512    3.8      5,250    3.8      12,190    4.4      10,102    4.4

Taxes (other than income tax)

     3,098    1.8      2,295    1.7      6,034    2.2      4,667    2.0

Telephone and utlities

     1,129    0.7      983    0.7      2,217    0.8      1,951    0.8

Other

     8,123    4.7      6,766    5.0      14,871    5.3      12,287    5.4
    

  
  

  
  

  
  

  
     $ 50,330    29.4    $ 38,819    28.3    $ 86,930    31.3    $ 70,035    30.4
    

  
  

  
  

  
  

  

 

SG&A expenses in U.S. dollars during the three months ended December 31, 2003 increased by $11,511,000 over the comparable quarter last year. This comparison was influenced by the effects of a stronger Canadian dollar. Measured at the same exchange rates, SG&A expense for the quarter increased by $4,307,000 or about 9%. This increase includes $711,000 in professional fees primarily associated with the evaluation and implementation of strategic decisions to enhance shareholder value and the now resolved proxy contest involving board composition. Year to date, SG&A expenses have increased by $16,895,000 over the same period last year. This comparison is also influenced by the effects of a stronger Canadian dollar. Measured at the same exchange rates, SG&A expense for the six months ended December 31, 2003 increased by $5,400,000 or about 7%. This increase includes professional fees described above aggregating $1,261,000 on a year to date basis.

 

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The following is a breakdown of the same-exchange-rate increases in SG&A expense during the three and six months ended December 31, 2003 over the comparable prior year periods:

 

(In thousands)


   Quarter

    Year to
Date


 

Payroll

   $ 2,411     $ 2,609  

Advertising

     1,145       1,211  

Rent

     257       383  

Taxes (other than income taxes)

     363       582  

Telephone and utilities

     (43 )     (63 )

Other

     174       678  
    


 


Increase

   $ 4,307     $ 5,400  
    


 


 

The increases in payroll are partially attributable to the addition of a net 18 new RadioShack stores and 7 Rogers Wireless stores. The increases in payroll costs and related taxes and benefits are also as a result of a conscious effort to place more associates in the field to improve customer service. The increases in advertising expense were due to planned increases in television, inserts and other print media to support the merchandising plan and generate sales growth. The increases in other SG&A expenses are primarily attributable to the professional and other fees described above, partially offset by a reduction in the annual store managers’ meeting expense, which was vendor funded in this year and by certain other non-recurring recoveries.

 

Foreign Currency Transaction Gains / Losses

 

Foreign currency transaction losses were $183,000 during the second quarter of fiscal year 2004 compared with a loss of $3,000 for the comparable quarter last year. This year’s loss is primarily due to the effects of a stronger Canadian dollar on U.S. dollar denominated cash balances maintained by InterTAN Canada, in support of U.S. dollar commitments. For the six months ended December 31, 2003 and 2002, foreign currency gains (losses) were $(236,000) and $168,000, respectively.

 

Interest income and expense

 

Interest income for the quarter was $51,000 compared with $63,000 a year ago. Interest income for the six months end December 31, 2002 was $100,000, down from $159,000 last year. Interest expense for the quarter was $315,000 compared with $384,000 a year ago. For the six months ended December 31, 2003, interest expense decreased to $502,000 from $582,000.

 

Provision for Income Taxes

 

The provision for income taxes for the quarter was $10,847,000, compared with $6,174,000 in the prior year. The current year provision included a charge of $2,400,000 resulting from the unfavorable conclusion of a long outstanding dispute with the Internal Revenue Service related to the 1993 taxation year. A provision had not been previously recorded for this amount as the Company believed, on the advice of counsel, that the chances of prevailing on this matter were good. The effective tax rate for the quarter is high at 55% due to this tax charge

 

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and as a result of the professional fees described above which are not deductible for tax purposes by the Company’s Canadian subsidiary. If the tax provision and these expenses were eliminated, the effective tax rate would have been 41.3% compared with 43.6% during the second quarter of fiscal year 2003. For the six months ended December 31, 2003, the effective tax rate was 55% compared with 44.1% last year.

 

Outlook for the Third Quarter of Fiscal Year 2004

 

Management currently anticipates that the results for the third and final reporting period of the 2004 fiscal period will be approximately $0.00 per diluted share. The anticipated results includes professional fees associated with the project to enhance shareholder value and the defense of an action related to the sale of the Company’s former subsidiary in Australia of approximately $1,130,000 or $0.05 per diluted common share. This guidance is based on a model built on the following assumptions:

 

  Total sales growth in local currency of 4% to 6%;

 

  An increase in the gross margin percentage of 195 to 220 basis points;

 

  An increase in the SG&A percentage of 150 to 175 basis points, including approximately $1,130,000 in professional fees, or 120 basis points as described above;

 

  Net interest expense of about $100,000;

 

  A Canadian dollar exchange rate of about $0.75;

 

  Income taxes of approximately $1,000,000 to $1,200,000, reflecting the non deductibility of the professional fees described above; and

 

  A weighted average of approximately 20.8 million shares outstanding, assuming dilution.

 

Financial Condition

 

Most balance sheet accounts are translated from their values in local currency to U.S. dollars at the respective month end rates. The table below outlines the percentage change, to December 31, 2003, in the value of the Canadian dollar as measured against the U.S. dollar:

 

Percentage increase from December 31, 2002

   21.3

Percentage increase from June 30, 2003

   4.0

 

Most balance sheet comparisons will be heavily influenced by the effects of the stronger Canadian dollar.

 

Cash and Short-term Investments

 

Cash and short-term investments at December 31, 2003 were $38,528,000. Net of the short-term bank borrowings and current and non-current portion of the Company’s long-term bank indebtedness, the net balance at December 31, 2003 was $27,680,000. The short-term bank borrowings of $4,677,000 at December 31, 2003 represents a book overdraft due to outstanding cheques. Cash and short-term investments at December 31, 2002 and June 30, 2003 were $15,277,000 and $10,322,000, respectively.

 

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Accounts Receivable

 

Accounts receivable were $36,047,000 at December 31, 2003 compared with $25,523,000 at December 31, 2002 and $16,275,000 at June 30, 2003. The increase from June 30, 2003 resulted from the seasonal build up of dealer receivables for the holiday selling season and seasonal increases in amounts due from vendors for various subscriber-based services, including activation income, residuals and sales-based volume rebates. Increases in amounts due from vendors, primarily as a result of an increase in the sale of contract cellular phones, contributed to the increase from December 31, 2002.

 

Inventories

 

Inventories at December 31, 2003 were $94,068,000, up from $87,574,000 a year ago. This increase is more than attributable to foreign currency effects as, measured in local currency, inventories have decreased by 11.5%, notwithstanding a net addition of 16 retail locations. The reduction in inventory levels, as measured in local currency, reflects the implementation of improved forecast models and improvements in purchasing controls and disciplines. The Company has been able to achieve these reductions in inventory levels while, at the same time, improving its in stock position. At June 30, 2003 inventories were $92,433,000.

 

Prepaids, Deposits and Other Current Assets

 

Prepaids, deposits and other current assets at December 31, 2003 were $1,785,000 compared with $1,385,000 at December 31, 2002 and $5,301,000 at June 30, 2003. The balance at June 30, 2003 included an amount of $4,179,000 on deposit with RadioShack International Procurement Limited Partnership (RIPLP), in support of outstanding purchase orders. Outstanding orders with RIPLP are now backed by letters of credit.

 

Accounts payable

 

Accounts payable were $31,665,000 at December 31, 2003 compared to $26,894,000 at December 31, 2002 and $22,633,000 at June 30, 2003. The increase from June 30, 2003 is due to increased purchases for the holiday season as well as the fact that many of those purchases benefited from extended payment terms. The increase from December 31, 2002 is due primarily to foreign currency effects.

 

Accrued Expenses

 

Accrued expenses were $30,130,000 at December 31, 2003 compared with $24,763,000 at December 31, 2002 and $15,290,000 at June 30, 2003. The increase from the June 30, 2003 level is due primarily to the seasonal increase in certain sales-sensitive accruals. The increase from December 31, 2002 is due primarily to foreign currency effects.

 

Income Taxes Payable

 

Income taxes payable were $10,387,000 at December 31, 2003 compared with $2,203,000 at December 31, 2002 and $1,867,000 at June 30, 2003. These increases are due in part to the unfavorable conclusion of the issue in dispute with the Internal Revenue Service resulting in an amount owing of $2,400,000 (See Note 9 to the Company’s consolidated financial statements). Income taxes payable have also increased because the higher tax provision for this year in the Company’s Canadian subsidiary has not yet been reflected in the tax installments which are based on actual taxes payable for fiscal year 2003.

 

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Long-term Bank Indebtedness

 

Long-term bank indebtedness was $6,171,000 at December 31, 2003 compared with $6,360,000 at December 31, 2002 and $7,421,000 at June 30, 2003. The decrease from the June 30, 2003 and December 31, 2002 levels reflects the scheduled repayment made in December 2003. The impact of this repayment on the comparison with the balance at December 31, 2002 has been partially offset by foreign currency effects.

 

Liquidity and Capital Resources

 

Cash flows from operating activities during the six-month period ended December 31, 2003 generated $32,971,000 in cash, compared with $6,569,000 in cash during the comparable period last year. Net income was $10,372,000 during the six-month period ended December 31, 2003, compared with $9,352,000 a year ago. The increase in cash flows from operating activities was due primarily to changes in working capital requirements. In the six months ended December 31, 2003, changes in working capital provided $18,163,000 in cash. In the comparable prior period, working capital requirements consumed $6,721,000 in cash. This variance is due to the decrease in inventory levels, the return of the cash deposit placed with RIPLP and the increase in income taxes payable as a result of lower Canadian tax installments and the fact that the liability due to the Internal Revenue Service as a result of the recent Tax Court decision has not yet been paid. The cash provided by operating activities was offset by an increase in accounts receivable due to an increase in dealer receivables over the holiday selling season and an increase in amounts due from vendors.

 

Cash flow from investing activities consumed $4,044,000 and $3,359,000 in cash during the six-month periods ended December 31, 2003, and 2002 respectively. Additions to property and equipment were $1,218,000 higher during the first six months of fiscal year 2003 than during the corresponding prior year period.

 

During the six-month period ended December 31, 2003, cash flow from financing activities consumed $1,985,000 in cash compared with $2,340,000 during the first six months of fiscal year 2003. This reduction is attributable primarily to a reduction in the level of cash consumed by the repurchase of the Company’s common stock, partially offset by a reduction in net bank borrowings.

 

The Company’s principal sources of liquidity are its cash and short-term investments, its cash flow from operations and its banking facilities.

 

In December 2002 the Company’s Canadian subsidiary entered in a new credit facility (the “Credit Facility”) in the amount of C$85,000,000 (approximately $65,569,000 at December 31, 2003 exchange rates) with a major Canadian bank, replacing its existing asset-backed facility which had been in place since December 1997. The Credit Facility consists of two revolving renewable facilities and a five-year non-revolving term facility.

 

The first one-year renewable revolving facility is for C$30,000,000 (approximately $23,142,000 at December 31, 2003 rates of exchange.) This facility is intended for normal working capital requirements and is available throughout the year. The Credit Facility, as amended on September 15, 2003, provides that the amount that can be used for letters of credit is limited to C$5,000,000 during fiscal year 2003 (approximately $3,857,000 at December 31, 2003 rates of exchange), increasing to C$14,000,000 and C$17,000,000 during fiscal years 2004 and 2005, respectively. Further increases of C$2,000,000 each are contemplated for fiscal years 2006 and 2007.

 

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The second one-year renewable revolving facility is for C$45,000,000 (approximately $34,713,000 at December 31, 2003 rates of exchange.) This facility is for seasonal working capital requirements and is available only during the annual period of September 1 to January 31. This facility cannot be used for letters of credit and must be repaid in full each January 31.

 

The one-year renewable revolving and seasonal revolving facilities were re-negotiated and a loan amendment will be signed during the quarter ended March 31, 2004. The effect of the loan amendment will be an increase to the first one-year renewable revolving facility from C$30,000,000 to C$45,000,000 and a decrease to the second renewable revolving facility from C$45,000,000 to C$20,000,000. The seasonal facility will now be available only during the period August 1 to November 1, each calendar year.

 

Advances under these revolving facilities are limited to a borrowing base calculation tied to the Company’s accounts receivable and inventories. At December 31, 2002, no amounts were outstanding under either facility. The short-term bank borrowings in the amount of $4,677,000 at December 31, 2003 represent a book overdraft due to outstanding cheques. At December 31, 2003, C$3,035,000 (approximately $2,341,000 at December 31, 2003 rates of exchange) was committed in support of letters of credit. At December 31, 2003, C$41,965,000 (approximately $32,372,000 at December 31, 2003 rates of exchange) was available for use under these facilities.

 

These two revolving facilities will be used primarily to finance seasonal inventory build up and, from time to time, to provide letters of credit in support of purchase orders. Under the terms of the Company’s Merchandise Agreement with RadioShack U.S.A., purchase orders with Far Eastern suppliers must be supported, based on a formula set out in the Merchandise Agreement, by letters of credit issued by banks on behalf of InterTAN, by a surety bond, or backed by cash deposits. The Company has secured surety bond coverage from a major insurer (the “Bond”) in an amount not to exceed $2,000,000. Use of the Bond gives the Company greater flexibility in placing orders with Far Eastern suppliers by releasing a portion of the credit available under the Revolving Loan Agreement for other purposes.

 

The Credit facility also includes a five–year non-revolving term facility in the amount of C$10,000,000 (approximately $7,714,000 at December 31, 2003 rates of exchange.) This facility is intended for capital expenditures or the repurchase of the Company’s common stock. In December 2002, the Company drew down on this facility in full to finance the seventh share repurchase program announced in October 2002. A repayment of C$2,000,000 (approximately $1,543,000 at December 31, 2003 rates of exchange) was made in December, 2003. Consequently, at December 31, 2003 C$8,000,000 (approximately $6,171,000 at December 31, 2003 rates of exchange) was outstanding under this facility. Further repayments of C$2,000,000 are due on December 17, 2004 through December 17, 2007, inclusive.

 

The Credit Facility requires that the Company remain in compliance with certain financial ratios including the current ratio, fixed charge coverage ratio, tangible net worth and total adjusted debt to tangible net worth. The Company was in compliance with all of these covenants at December 31, 2003 and management does not anticipate any difficulty in remaining in compliance throughout the term of the facility. Borrowing rates under the facility range from Canadian prime plus 0.50% to prime plus 1.5%, based on the Company’s quarterly performance against predetermined fixed charge coverage ratios. Using the same criteria, the Company may borrow at Canadian bankers’ acceptance and LIBOR rates plus from 1.50% to 2.5%. Letters of credit are charged at rates ranging from 1.5% per annum to 2.5% per annum, using the same performance criteria. Using the same fixed charge coverage test, a standby fee of 0.25% to 0.50% is payable on the unused portion of the revolving credit facilities at that time.

 

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Security granted by InterTAN Canada Ltd. to secure its obligations under the Credit Facility include a demand debenture with a face value of C$125,000,000 (approximately $96,425,000 at December 31, 2003 rates of exchange), general security agreement, charge/mortgage on real property owned by it and a general assignment of accounts receivable. The obligations of InterTAN Canada Ltd. are further secured by a guarantee issued by InterTAN, Inc. of all future indebtedness, liability and obligations now or in the future owing by it to lenders under the Credit Facility.

 

The cost of establishing the Credit Facility, including professional fees and a loan origination fee were approximately C$1,000,000 (approximately $771,400 at December 31, 2003 exchange rates.) These costs have been allocated between the revolving and non-revolving facilities. Costs aggregating C$290,000 (approximately $224,000 at December 31, 2003 rates of exchange) were allocated to the short-term facilities and the remaining C$710,000 (approximately $548,000 at December 31, 2003 rates of exchange) were allocated to the long-term facility. These costs will be amortized over the terms of the respective facilities.

 

The Company’s primary uses of liquidity during the remainder of the 2004 fiscal period will include the funding of capital expenditures, funding the repurchase of common stock (subject to market conditions) and payments in settlement of tax issues. Management estimates that capital expenditures in Canada during the remainder of the fiscal period ending March 31, 2004 will approximate $2,000,000 to $3,000,000. These expenditures relate primarily to investments in store assets, including new stores, renovating and relocating existing stores, store fixtures and equipment, and enhancements to management information systems. In July 2003, the Company announced approval of an eighth stock repurchase program under which management is authorized, subject to market conditions, to purchase up to 1,025,000 shares of the Company’s common stock. During the three months ended December 31, 2003 the company purchased 586,400 shares at an aggregate cost of approximately $5,700,000. While further purchases under this program will depend on market conditions, management estimates that the program could require up to $5,000,000 in cash during the remainder of the 2004 fiscal period. Management estimates that at December 31, 2003 the liability to settle all of the Company’s remaining outstanding Canadian and United States tax issues was approximately $5,125,000 and that this amount will likely be paid during the 2004 fiscal period. Management projects that borrowings under the revolving portion of the Credit Facility will peak at approximately C$5,000,000 ($3,860,000 at December 31, 2003 exchange rates) during the remainder of the 2004 fiscal period.

 

Management believes that the Company’s cash and short-term investments on hand and its cash flow from operations combined with its banking facilities and the Bond will provide the Company with sufficient liquidity to meet its planned requirements through the 2004 holiday selling season.

 

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company is exposed to a variety of market risks arising primarily from the impact of foreign currency fluctuations as they relate to its investment, debt and activities in Canada and from the impact of changes in interest rates on its short-term credit facilities.

 

Foreign currency fluctuations

 

The Company’s activities are carried on in Canada. The Company is exposed to foreign currency risks in three broad areas:

 

  Its inventory purchases,

 

  Translation of its financial results, and

 

  Its net investment in Canada.

 

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Inventory purchases

 

In fiscal year 2003, approximately 20% of RadioShack Canada’s purchases were from vendors requiring payment in U.S. dollars. Accordingly, there is risk that the value of the Canadian dollar could fluctuate relative to the U.S. dollar from the time the goods are ordered until payment is made.

 

Management monitors the foreign exchange risk associated with its U.S. dollar open orders on a regular basis by reviewing the amount of such open orders, exchange rates, including forecasts from major financial institutions, local news and other economic factors. Based on this input, management decides whether or not to mitigate the exchange risk of a portion of those orders in advance of delivery by purchasing forward exchange rate contracts to be settled on or near the estimated date of inventory delivery. For financial reporting purposes, the Company is not able to designate these contracts as hedges. No forward exchange contracts were outstanding at December 31, 2003. At December 31, 2003, U.S. dollar purchase orders totaled approximately $6,970,000 (approximately C$9,036,000 at the December 31, 2003 exchange rate). Consequently, a 10% decline in the value of the Canadian dollar would result in an increase in product cost of about C$904,000. The incremental cost of such a decline in currency values, if incurred, would be reflected in higher cost of sales in future periods. In these circumstances, management would take product-pricing action, where appropriate.

 

Translation of financial results

 

The functional currency of the Company’s Canadian subsidiary is the Canadian dollar. However, the reporting currency of the Company on a consolidated basis is the U.S. dollar. Consequently, fluctuations in the value of the Canadian dollar have a direct effect on reported consolidated results. It is not possible for management to effectively hedge against the possible impact of this risk. Had the average value of the Canadian dollar been 10% lower during the second quarter of the 2004 fiscal period, sales and operating income would have been reduced by approximately $17,128,000 and $2,019,000, respectively.

 

Net investment in Canada

 

The Company’s net investment in Canada is recorded in U.S. dollars at the respective period-end rates. Changes in these rates will have a direct effect on the carrying value of this investment. The cumulative effect of such currency fluctuations is recorded in stockholders’ equity in accumulated other comprehensive loss. The Company’s net investment in Canada at December 31, 2003 was $111,330,000. If the Canadian dollar were to lose 10% of its value against the U.S. dollar, other comprehensive income would decrease by $11,133,000. The Company currently has no plans to hedge its investment in Canada.

 

Short-term interest rates

 

The Company’s credit facilities consist of two revolving renewable facilities and a five-year non-revolving term facility. These banking arrangements, which are used primarily to finance inventory purchases and the Company’s stock repurchase program, provide for interest on any short-term and long-term borrowings at rates determined with reference to the local “prime” or “base rates”. These rates are, therefore, subject to change for a variety of reasons that are beyond the Company’s control. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” which is incorporated herein by reference. During the second quarter of fiscal year 2004, average borrowings under these credit facilities were approximately C$16,510,000 (approximately $12,736,000 at December 31, 2003 rates of exchange) and interest paid on such advances was approximately C$306,000 (approximately $233,000 at December 31, 2003 rates of exchange). Interest on these borrowings was payable at the Canadian prime rate plus 0.50% to 1.50% and Canadian banker’s acceptance rates plus 1.50% to 2.50%. Had the borrowing rate been 10% higher, management estimates that interest expense for the quarter would have increased by approximately C$30,600. It has not been the Company’s policy to hedge against the risk presented by possible fluctuations in short-term interest rates.

 

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ITEM 4 – CONTROLS AND PROCEDURES

 

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1

  LEGAL PROCEEDINGS
    During the fourth quarter of fiscal year 2001, the Company sold its former subsidiary in Australia.
    The reported gain on the disposal was based on management’s estimation of certain adjustments to be paid following completion of the sale. The purchaser, DSE (Holdings) Pty Limited, disputed management’s calculation of the adjustments and commenced legal action in support of its claim on April 2, 2002, in the Federal Court of Australia. Management believes that its calculation of the adjustments is appropriate and that there are strong arguments against the position adopted by the purchaser. The Company is in the process of vigorously defending its position. Should the purchaser prevail in this litigation, the Company would have an additional liability of approximately $3,126,000 at December 31, 2003 exchange rates.
    The Company has an issue in dispute with the United States Internal Revenue Service (“IRS”) regarding a notice of deficiency received from the IRS in February 2002 asserting an accuracy-related penalty. The Company disagrees with the position of the IRS on this issue and, based on advice of legal counsel, believes it has meritorious arguments in its defense. The Company filed a petition in United States Tax Court on June 6, 2002, and is in the process of vigorously defending its position. While management has determined that no additional provision needs to be recorded for this matter, should the IRS prevail in its position the Company would have an additional liability of approximately $2,300,000.
    With the exception of the matters discussed above, there are no pending legal proceedings, other than non-material ordinary routine litigation incidental to InterTAN’s business, to which InterTAN or any of its subsidiaries is a party or to which any of their property is subject.

ITEM 4

  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    At the Company’s Annual Meeting of Stockholders held on December 5, 2003, W. Darcy McKeough and Ron G. Stegall were re-elected to the Board of Directors. In such connection, Mr. McKeough received 19,137,386 votes “For” election and 109,392 votes were withheld. Mr. Stegall received 19,138,895 votes “For” election and 107,883 votes were withheld. In total 20,673,314 shares were authorized to vote.

 

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ITEM 6

  EXHIBITS AND REPORTS ON FORM 8-K

    a)

  Exhibits Required by Item 601 of Regulation S-K:

 

Exhibit No.


  

Description


3(a)    Restated Certificate of Incorporation (Filed as Exhibit 3(a) to InterTAN’s Registration Statement on Form 10 and incorporated herein by reference).
3(a)(i)    Certificate of Amendment of Restated Certificate of Incorporation (Filed as Exhibit 3(a)(i) to InterTAN’s Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference).
3(a)(ii)    Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (Filed as Exhibit 3(a)(i) to InterTAN’s Registration Statement on Form 10 and incorporated herein by reference).
3(b)    Bylaws (Filed on Exhibit 3(b) to InterTAN’s Registration Statement on Form 10 and incorporated herein by reference).
3(b)(i)    Amendments to Bylaws through August 3, 1990 (Filed as Exhibit 3(b)(i) to InterTAN’s Annual Report on Form 10-K for fiscal year ended June 30, 1990 and incorporated herein by reference).
3(b)(ii)    Amendments to Bylaws through May 15, 1995 (Filed as Exhibit 3(b)(ii) to InterTAN’s Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference).
3(b)(iii)    Amended and Restated Bylaws (filed as Exhibit 3(b)(iii) to InterTAN’s Annual Report on Form 10-K for fiscal year ended June 30, 1996 and incorporated herein by reference).
4(a)    Articles Fifth and Tenth of the Restated Certificate of Incorporation (included in Exhibit 3(a)).
4(b)    Rights Agreement between InterTAN, Inc. and Bank Boston, NA (filed as Exhibit 4 to the company’s Form 8-A filed on September 17, 1999 and incorporated herein by reference)

 

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*31.1   Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
*31.2   Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
*32.1   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

 

    b)   Reports on Form 8-K:
    A report on Form 8-K was filed on October 9, 2003, in which the Company reported that on that date the Company had issued a press release reporting its sales for the month of September 2003 and for the three-month period then ended. A copy of the press release was attached as an Exhibit.
    A report on Form 8-K was filed on October 24, 2003 in which the Company reported that a press release had been issued dated October 24, 2003, reporting the Company’s results of operations, financial position and cash flows for the three months ended September 30, 2003. The press release, including the Company’s consolidated statement of operations, consolidated balance sheets and consolidated statements of cash flows, was attached as an Exhibit. The Form 8-K also reported that on October 24, 2003 InterTAN Inc. and Liberation Investments jointly issued a press release concerning the resolution of a proxy contest. A copy of the joint press release was attached as an Exhibit.
    A report on Form 8-K was filed on October 27, 2003, in which the Company reported that on October 24, 2003, the Company had held a telephonic conference call to discuss and answer questions concerning its first quarter fiscal year 2004 and other matters, including the resolution of a proxy contest. The results and other matters were the subject of two press releases dated October 24, 2003 and were also the subject of a Form 8-K filing dated October 24, 2003, as noted above. A transcript of the conference call was attached as an Exhibit.
    A report on Form 8-K was filed on December 8, 2003, in which the Company reported that a press release had been issued dated December 5, 2003, reporting that the Company had retained Spencer Stuart to conduct a search for appropriate candidates to join the Company’s Board of Directors. The press release also reported that on December 5, 2003, the Board of Directors had resolved to change the fiscal year end of the Company to March 31 form June 30 to better reflect the Company’s operational business cycle. The Company also confirmed in the press release its intention to continue efforts towards effecting an inversion to Canada. A copy of the press release was attached as an Exhibit.

 

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    A report on Form 8-K was filed on January 7, 2004, in which the Company reported that a press release had been issued dated January 7, 2004 that reported sales for the month of December 2003, the result of a ruling in respect of a tax dispute between the Company and the IRS and announced updated guidance for the second quarter for its 2004 fiscal period. The press release was attached as an Exhibit.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    InterTAN, Inc.
    (Registrant)
Date: May 19, 2004   By:  

/s/ James P. Maddox


        James P Maddox
       

Vice-President and

Chief Financial Officer

        (Principal Accounting Officer)

 

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InterTAN, Inc.

Form 10Q – Period Ended December 31, 2003

Index to Exhibits

 

Exhibit No.

 

Description


3(a)   Restated Certificate of Incorporation (Filed as Exhibit 3(a) to InterTAN’s Registration Statement on Form 10 and incorporated herein by reference).
3(a)(i)   Certificate of Amendment of Restated Certificate of Incorporation (Filed as Exhibit 3(a)(i) to InterTAN’s Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference).
3(a)(ii)   Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (Filed as Exhibit 3(a)(i) to InterTAN’s Registration Statement on Form 10 and incorporated herein by reference).
3(b)   Bylaws (Filed on Exhibit 3(b) to InterTAN’s Registration Statement on Form 10 and incorporated herein by reference).
3(b)(i)   Amendments to Bylaws through August 3, 1990 (Filed as Exhibit 3(b)(i) to InterTAN’s Annual Report on Form 10-K for fiscal year ended June 30, 1990 and incorporated herein by reference).
3(b)(ii)   Amendments to Bylaws through May 15, 1995 (Filed as Exhibit 3(b)(ii) to InterTAN’s Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference).
3(b)(iii)   Amended and Restated Bylaws (filed as Exhibit 3(b)(iii) to InterTAN’s Annual Report on Form 10-K for fiscal year ended June 30, 1996 and incorporated herein by reference).
4(a)   Articles Fifth and Tenth of the Restated Certificate of Incorporation (included in Exhibit 3(a)).
4(b)   Rights Agreement between InterTAN, Inc. and Bank Boston, NA (filed as Exhibit 4 to the company’s Form 8-A filed on September 17, 1999 and incorporated herein by reference)

 

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* 31.1   Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
* 31.2   Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
* 32.1   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* 32.2   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

 

33

EX-31.1 2 dex311.htm SECTION 302 CEO CERTIFICATION Section 302 CEO Certification

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a)/15d-14(a)

 

I, Brian E. Levy, certify that:

 

  (1) I have reviewed this Quarterly Report on Form 10-Q/A for the three-month period ended December 31, 2003 of InterTAN, Inc.;

 

  (2) Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

 

  (3) Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

 

  (4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure and control procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

 

  b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and

 

  c) disclosed in this Quarterly Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


  (5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

/s/ Brian E. Levy


Brian E. Levy

President and Chief Executive Officer

May 19, 2004

EX-31.2 3 dex312.htm SECTION 302 CFO CERTIFICATION Section 302 CFO Certification

Exhibit 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a)/15d-14(a)

 

I, James P. Maddox, certify that:

 

  (1) I have reviewed this Quarterly Report on Form 10-Q/A for the three-month period ended December 31, 2003, of InterTAN, Inc.;

 

  (2) Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

 

  (3) Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

 

  (4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure and control procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

 

  b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and

 

  c) disclosed in this Quarterly Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


  (5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

/s/ James P. Maddox


James P. Maddox

Vice President and Chief Financial Officer

May 19, 2004

EX-32.1 4 dex321.htm SECTION 906 CEO CERTIFICATION Section 906 CEO Certification

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of InterTAN, Inc. (the “Company”) on Form 10-Q/A for the three months ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I Brian E. Levy, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Brian E. Levy


Brian E. Levy

President and Chief Executive Officer

May 19, 2004

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 5 dex322.htm SECTION 906 CFO CERTIFICATION Section 906 CFO Certification

Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of InterTAN, Inc. (the “Company”) on Form 10-Q/A for the three months ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I James P. Maddox, Vice President and Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ James P. Maddox


James P. Maddox

Vice President and Chief Financial Officer

May 19, 2004

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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